Other Stuff

I spent the month of September lecturing, and interacting with (literally) thousands of entrepreneurs in two emerging startup markets, Finland and Russia. This is the first of two posts about Finland and entrepreneurship.

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I was invited to Finland as part of Stanford’s Engineering Technology Venture Program partnership with Aalto University. (Thanks to Kristo Ovaska and team for the fabulous logistics!) I presented to 1,000’s of entrepreneurs, talked to 17 startups, gave 12 lectures, had 9 interviews, chatted with 8 VC’s, sat on 4 panels, talked policy with 2 government ministers, 2 members of parliament, 1 head of a public pension fund and was in 1 TV-documentary.

What I found in Finland was:

a whole lot of smart, passionate entrepreneurs who want to build a startup hub in Helsinki

a government that’s trying to help, but gets in the way

a number of exciting startups, but most with a narrow, too-local view of the world

and the sense that, before too long, they may well get it right!

While a week is not enough time to understand a country this post – the first of two – looks at the Finnish entrepreneurial ecosystem and its strengths and weaknesses.

The Helsinki SpringEntrepreneurship and innovation are bubbling around Helsinki and Aalto University. There are thousands of excited students, and Aalto university is working hard to become an outward facing institution. Having a critical mass of people who think startups are cool in the same location is a key indicator of whether a cluster can catch fire. Finnish startup successes on a global stage include MySQL, F-Secure, Rovio, Habbo, Playfish, The Switch, Tectia, Trulia and Linux. While it’s not clear yet whether the numbers of startups in Helsinki are sufficient to ignite, it feels like it’s getting there, (and given the risk-averse and paternal nature of Finland that by itself is a miracle.)

The good news is that for a 5 million person country, there’s an emerging entrepreneurialecosystem that looks like something this:

9-to-5 Venture CapitalIronically one of the things that’s holding back the Finnish cluster is Tekes, the government organization for financing research, development and innovation in Finland. It’s hard enough to pick which existing companies with known business models to aid. Yet Tekes does that and is trying to act like a government-run Venture Capital firm. At Tekes, government employees (and their hired consultants) – with no equity, no risk or reward, no startup or venture capital experience – try to pick startup winners and losers.

Tekes has ended up competing with and stifling the nascent VC industry, indiscriminately handing out checks to entrepreneurs like an entitlement. (To be fair this is an extension of the government’s role in almost all parts of Finnish life.)

In addition to Tekes, Vigo, the government’s attempt at funding private business accelerators, started with good intentions and got hijacked by government bureaucrats. The accelerators I met with (the ones the government pointed to as their success stories) said they were leaving the program.

Tekes lacks a long-term plan of what the Finnish government’s role should be in funding startups. I suggested that they might want to consider putting themselves out of the public funding business byusing public capital to kick-start private venture capital firms, incubators and accelerators. And they should give themselves a 5-10 year plan to do so. Instead they seem to be stuck in the twilight zone of not having a long-term vision of their role. (There has been tons of reports on what to do, all seemingly ignored by an entrenched bureaucracy.)

Lack of Business ExperienceDirect government funding of startups has also delayed the maturation of business experience of local angels and VC’s. Finnish private investors don’t yet have enough time-in-grade to have developed good pattern recognition skills, and most lack operating backgrounds. I have no doubt they’ll get there by themselves, but in wouldn’t take much imagination to attempt to recruit some seasoned overseas investors to add to the mix.

Even a more serious challenge is the lack of global business competence. The number of serial entrepreneurs is very low and until recently most of the talented sales and marketing professionals choose to work for Nokia.

Thank you Steve! Fascinating when you think of the environment that Aalto for one is seeking to culture in Helsinki and Finland. Hopefully, despite the start-up-hostile circumstances, entrepreneurs in Finland will prevail and truly bring about a new spring to the “Arctic Valley”.

MySQL DB is originally made by a finnish programmer Michael “Monty” Widenius. His daughter’s name is My and so MySQL got it’s name. Michael Widenius founded a company MySQL AB with swedish David Axmark.

I guess every country has their own “9 to 5 VC:s”, but I am not sure if they here really have any big negative effect on the angel&VC investor operations – in my experience smart investors and startups don’t give a shit about them — they are after something real and 9 to 5 Tekes is too slow for that type of dance.

I am an entrepreneur and patriot, I love the word “Finnish” even when expressed with the tone you seem to have in that phrase “Finnish culture”. I also think that a local view is very important for almost all startups. I do understand, however, that many times being “too narrow” certainly is a limitation from the VC point of view.

It’s good that finally an authority like Steve stated the problems with TEKES out loud (hope you said it also to TEKES and government representatives). I for one start to believe that it’s better not to apply funding from government in Finland at all.

But there is a good buzz and new attitude to startup culture and entrepreneurship growing in Finland.

I would nicely and kindly ask you Steve to change the title of your article.
I couldn’t be there at your lectures, but I’ve understood that you were talking about the Finnish Spring instead of Helsinki Spring?
Of course 1 week is very short time to get a bigger picture of what is happening here in Finland, but I can tell there is much more than just Aalto and the capital city.
I assume that entrepreneurs from other parts of the country couldn’t be present, because we need to work for our start-ups, and it really takes 2 days of our precious time to come to Helsinki from for example Lapland where my company is located to. And that’s why you perhaps met only companies located to the capital area. So I’d like to invite you to Rovaniemi next time :)

[…] The Helsinki Spring (as named by Steve Blank) is a great example of this. Students, entrepreneurs, financiers, politicians, and many other people and organizations have come together to create an ecosystem that is supportive for new startups. But what makes Finland such a good place for startups right now? For me right now it is the community of people and organizations that have come together to tackle the challenge together. Like in many previous difficult settings, Finnish people have a tendency to stick together and muscle through. We come up we new innovative ways to use the resources we have and as said “we make things happen”. […]